Speaking of US-China competitiveness, Paul Krugman has been on a tear over the past week arguing that the US has to put some muscle behind its demands for China to stop undervaluing the yuan. The other day Krugman addressed China’s allegations that imposing countervailing tariffs to retaliate for Chinese currency manipulation would violate WTO rules. And indeed it isn’t really clear whether WTO and IMF rules consider currency manipulation to be a trade subsidy, so it’s not clear whether the US has a case on those grounds.

But here’s my question: if it’s not a violation of WTO rules to manipulate your own currency, why doesn’t the US simply do exactly the same thing China is doing? Why don’t we purchase a countervailing quantity of Chinese government debt to compensate for the US government debt China buys in order to keep the yuan low? Is it because the US government, unlike the Chinese government, lacks the spare cash to buy up foreign debt? If so, couldn’t the Fed do this as an open-market operation? Or is it because the Chinese State Bank controls sales of government bonds and would stop us from buying up Chinese debt via administrative measures? Or does Chinese government debt simply not trade openly? Or what?

I saw this guy Sunday afternoon risking his life while attempting a routine maintenance task in our neighborhood here in Hanoi, and it reminded me of why US industry still remains potentially competitive in many sectors with industry in East Asian emerging markets. Things here are simply much, much less efficient. The country has extremely pressing infrastructure needs to fulfill just to ensure it won’t have continuing blackouts knocking out power to factories, traffic jams that prevent goods from getting to port, sewers that don’t flood streets with excrement every rainy season, and so on. And of course the incredible tangle of wires that is the residential power, phone, and internet system, which I hereby dub the Infrasnargle.

All of these contribute to the fact that Vietnamese workers are vastly less productive than American ones. PPP-adjusted output per worker in the Vietnamese manufacturing sector in 2008 was $8100. For Chinese workers, it was $22,000. For American workers, it just passed $300,000 this year. (I’m not really clear on why we’re using PPP-adjusted figures here; for purposes of comparing competitiveness in exports, the flat dollar value seems more appropriate. But regardless, it’s clear that workers in the US economy can produce vastly more value per hour.)

That said, Vietnam is frantically investing in infrastructure improvements, and if we want to keep American workers competitive, we need to do the same.

I somehow missed this story for almost an entire day: a mobile phone accessory salesman in Ho Chi Minh City says he’s seen a prototype Apple iPhone 4G. He posted a blog entry, including video and pics, on the Vietnamese gadget geek site Tinh Te. He says the device was recognized as an Apple iPhone when he plugged it into his MacBook, and has screenshots to prove it.

It’s basically impossible to keep anything secret in Vietnam. It’s basically impossible to keep anything secret in China. It’s entirely unsurprising that Apple’s industrial operations there are leaking like a sieve. The main difficulty in determining whether or not this 4G iPhone is real or not lies in the fact that Vietnam is currently completely flooded with cheap fake Chinese iPhone knockoffs. My assistant has one. It says it was manufactured in “Clifornia”. So take this all with a grain of salt. But the video on the Tinh Te site looks very convincing.

…we prefer to call it “advancing free expression through active engagement in over 100 countries, even as we comply with the laws in every country in which we operate.”

Google has done a lot over the past two weeks to earn my goodwill. Yesterday they did another thing to earn my goodwill.

We believe that malware is a general threat to the Internet, but it is especially harmful when it is used to suppress opinions of dissent…
This particular malware broadly targeted Vietnamese computer users around the world. The malware infected the computers of potentially tens of thousands of users who downloaded Vietnamese keyboard language software and possibly other legitimate software that was altered to infect users. While the malware itself was not especially sophisticated, it has nonetheless been used for damaging purposes. These infected machines have been used both to spy on their owners as well as participate in distributed denial of service (DDoS) attacks against blogs containing messages of political dissent. Specifically, these attacks have tried to squelch opposition to bauxite mining efforts in Vietnam, an important and emotionally charged issue in the country.

I spent two weeks in Beijing five years ago and loved it. At that point the hutong neighborhoods had already experienced a campaign of progressive annihilation for five or ten years, but there were still large swathes of them remaining, and there was a groundswell of opinion among Chinese architects that they ought to be preserved. Also, the city had put some brilliant young urban planners in high positions for the plans for the 2008 Olympics. It looked like a new generation of better-educated young urban planners and designers with international perspectives might mean a more sophisticated approach to the future of the city that preserved some of its heritage and texture.

That doesn’t seem to have happened. In fact, the Beijing neighborhood I found most appealing, the one hutong area that looked likely to persevere because it had become a hipster, arts and bougie tourist mecca, looks to be slated for one of those dismal Disneyfied “renovation” projects.

Much of the problem here is the lack of widespread appreciation for the genuine feel of the historical in these late-modernizing East Asian societies. Only a few, mainly older, educated members of the elite care about such things. But I think there may be another factor at work besides (lack of) aesthetics. Over the past couple of years, as I’ve watched many of the nicest houses in the Hanoi lakeside village where I live getting demolished for larger, nondescript modern houses and small apartment buildings, I’ve come to feel that much of the problem may be the dramatic income differentials that are appearing in third-world countries successfully leaping into development and modernization. The construction workers who build new houses in our neighborhood come from desperately poor areas of the countryside where nominal per capita income may still be under $300/year. Rent for a house in our neighborhood is averaging at least $2000 per month; a six-floor apartment building would bring in over $5000/month. The disparity between the daily wage of a construction worker and the price his labor can bring (in the form of new rents) is simply too large; it’s sweeping away entire neighborhoods. Much of the classic French colonial architecture of downtown Hanoi has already been annihilated. Because officials know they’re supposed to preserve the aesthetic feel of such areas, they commission multi-story blocks with pseudo-French detailing, huge mansard roofs and window shutters, but the clumsy postmodern imitation only exacerbates the ugliness. But I can’t quite believe that the reason Paris has remained Paris, while Hanoi is turning into some cut-rate Singapore, is solely due to the aesthetic superiority of the French themselves. I think it’s possible that the vast economic gap between what it costs to employ a day-laborer and the worth of an urban building simply never opened quite so wide in Paris in the 19th century, when the country was making its leap to modernity.

Overall, obviously, economic development is a good thing. But I have a feeling that within 25 years there’ll be very little reason to visit China or Vietnam. They’ll look more or less like Tysons Corners, Virginia, but with less nature. And the fast-food restaurants in the strip malls will serve pho. Though I understand you can get a mean bowl of pho in Tysons Corners, too.

One would like the end of the Cold War and the collapse of Communism to be seen not as something in which America “won” and Russia “lost.” Russian people are, after all, much better off in 2010 than they were in 1980. But people have national pride, and Russians were once the core ethnic group of a mighty power and now simply have a nation-state that, while large, is clearly slipping behind other contenders in a whole variety of ways. The Olympics is a basically harmless venue for nationalistic passions, but these sentiments generally get played out in ways that are very much not harmless.

It’s really not at all clear that the median Russian is much better off in 2010 than he or she (especially he) was in 1980. For one thing, male life expectancy was 62.7 in 1980 and 61.8 in 2008. Though to a large extent this stems from the fact that it’s now much easier and cheaper to purchase alcohol, cigarettes, and heroin, which I guess you could think of as being “better off” in some ways.

More important, it is even less clear that Russian people are better off now than they would have been if the Communist Party were still running a unified Soviet Union with a reformed, semi-privatized market economy. The examples of China and Vietnam suggest that they are not. And the incredible rise of China to Olympic superpowerdom has followed the country’s economic rise to prosperity under an authoritarian single-party political system. Which serves as evidence for a lot of Russians that trying to move towards a Euro-American model of governance by driving the CPSU from power in 1991 might have been a mistake.